There’s a little more mobile muscle at Baidu.com, Inc. (ADR) (NASDAQ:BIDU), and Wall Street seems to like the new look.
Shares of China’s leading search engine opened 5% higher this morning after proposing a $1.9 billion deal for mobile apps marketplace giant 91 Wireless.
Baidu.com, Inc. (ADR) (NASDAQ:BIDU) has made some pretty big deals over the past two years to grow its presence in everything from online video to travel portals, but it’s never cracked open its wallet wide enough for a 10-figure transaction.
However, this acquisition will be a game changer for Baidu.com, Inc. (ADR) (NASDAQ:BIDU). At a time when Baidu stock is being dogged by pesky search rival Qihoo 360 Technology Co Ltd (NYSE:QIHU) and fears that it’s not doing enough as desktop usage migrates to mobile computing, 91 Wireless operates a pair of leading smartphone app distribution platforms in China. A whopping 10 billion apps have been downloaded through the 91 Wireless marketplaces.
Global leader Google Inc (NASDAQ:GOOG) is living proof that investors gravitate to dot-com giants that are growing in mobile. Google hit another all-time high this week, even though its market share when it comes to search in its home market is a lot lower than Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s roughly 70% chunk of the Chinese market. Baidu is also growing at a healthier organic clip than Google, but investors have flocked to Google because Android makes it a juggernaut when it comes to mobile.
The 91 Wireless deal won’t move the needle in the near term, financially. Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is probably overpaying for the deal. Then again, it doesn’t have much of a choice. Qihoo 360 may only be commanding 15% of the search market, but the prevailing fear is that Baidu will continue to lose market share to Qihoo 360. It needs to be about more than just desktop search, and that’s why we’ve seen the mad scramble for dynamic online properties at Baidu.